Zia Laser investors pump in $8 M

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Clay Holtzman

NMBW Staff

Backed by an expanded syndicate of investors, Albuquerque's Zia Laser Inc. secured an $8 million venture capital round in the first quarter that will help bring its revolutionary nano-based, semiconductor technology closer to reality.

The round included participation from Palo Alto, Calif.-based RWI Group and Westwood, Mass.-based Prism Venture Partners. Both funds had been the sole investors in Zia's two previous rounds of $6 million that closed in 2001 and $5.5 million closed in 2002.

But this time, RWI and Prism were joined by Venrock Associates of New York City, Harris & Harris Group Inc., also from New York, and an unnamed strategic partner who is described by Zia as a leading semiconductor manufacturer.

Company co-founder and Chief of Operations, Petros Varangis, says his company's technical advancements since its second funding round helped attract the financial attention of the unnamed strategic partner.

"Over our last two years, we have shown significant progress," says Varangis.

Since its founding in 2000, Zia Laser has secured about $22 million from investors, including a $2 million bridge round closed in late 2004.

Zia will use the latest round to further develop its quantum dot technology -- extremely small, nanoscale "dots," or tiny bumps that stand less than seven-billionths of a meter tall, that are fixed onto a substrate. When multiple layers of the substrate are stacked and then stimulated with electricity, the dots can generate a laser beam capable of carrying data more efficiently than conventional methods.

Zia wants to incorporate its lasers into microprocessors -- tiny chips that process information inside computers -- to make them more efficient and possibly cheaper to produce.

Varangis says the fact that his company is now working with and receiving capital from a major semiconductor player hints his firm is on to something big.

According to a report published earlier this year by Connecticut-based Business Communications Company Inc., the worldwide market for quantum dot technology is about $10 million.

But, if the emerging technology can establish a niche for itself in several industries, including biotechnology, electronics and telecommunications, the worldwide market could grow to $500 million by 2009. The report does not specifically site an estimated size for quantum dot technology in the semiconductor market.

William Seifert, general partner with Prism Venture Partners and a Zia board member, says he, too, believes Zia is on to something big and that the C Round's expanded venture group means the technology is progressing.

"The company has managed to identify a major market need in a specific market segment," says Seifert. "The lasers, one can infer, can actually represent a substantial technological advancement in the personal computing industry."

For years, the transistors, connectors and other components placed on microprocessors have been getting smaller as chip fabricators like Intel Corp. (NASDAQ: INTC) strive to make them, and ultimately computers, more powerful.

But the miniaturization trend has its drawbacks. As manufacturers cram more components onto a chip, complications like power consumption and temperature can arise -- and the method is limited.

"In terms of microprocessors, speed has hit a wall," says Varangis.

Perhaps one of the greatest concerns is signal quality, and this is part of what Zia's technology attempts to address.

Zia's quantum dot-based laser allows computer chips to process some of their signals optically instead of entirely electronically. This evolution could lead to more efficient and less expensive microprocessors because they need fewer of the extra components required to offset complications.

Seifert and Varangis stop just short of saying the technology is revolutionary, but both say it could give birth to a next-generation of microprocessors.

When Zia was founded, its principals wanted to use their quantum dots to carry signals across fiber optic lines for the telecommunications industry. When the market flopped in 2000, Zia shifted gears and started thinking more about semiconductors.

The company was spun from the University of New Mexico's Center for High Tech Materials. Varangis worked there as a member of the research faculty. Some of Zia's engineers have come from there too.

Varangis says the recent round and the capital his company has raised are proof positive of the center's local contributions and its standing as a premiere opto-electronics research center.

"In a way, I think it's very good for the University of New Mexico," he says.

Zia has an exclusive license with UNM, but has since expanded its intellectual property holdings to include its own proprietary achievements.

Seifert says the moral of Zia's story is that sometimes the market for a company's technology will dry up, but it takes good entrepreneurs to look for that new opportunity.

"There are markets that come and there are markets that go, and this was one of them. Entrepreneurial spirit is a very powerful thing," he says.

Zia's round is New Mexico's largest since advanced solar panel maker Advent Solar completed an $8 million round in 2004's fourth quarter.

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